By Brijesh Patel

(Reuters) - Gold prices extended gains on Tuesday, hitting their highest level in more than three-and-a-half months, as a weaker U.S. dollar and growing inflationary pressure bolstered the metal's appeal as an inflation hedge.

Spot gold was up 0.2% at $1,869.12 per ounce by 0642 GMT, after hitting its highest since Jan. 29 earlier in the day. U.S. gold futures rose 0.1% to $1,869.90.

"Gold ETFs have actually started to pick up again this month, which is positive because the market is reading higher inflation, at least over the short term," said Stephen Innes, managing partner at SPI Asset Management.

"If the dollar continues to weaken, gold could catch fire, but much of this in Asia is pretty muted. The real key here is how gold is going to perform to London open."

The dollar index slipped 0.2% to hit a one-week low against its rivals. [USD/]

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.7% to 1,035.93 tonnes on Monday, their highest since late-March. [GOL/ETF]

In the wake of rising prices in the United States, minutes of the Federal Reserve's last policy meeting due on Wednesday are expected to provide further clarity on the central bank's monetary policy outlook and policymakers' view on inflation.

Dallas Fed Bank President Robert Kaplan reiterated his view that he does not expect interest rates to rise until next year.

"The trigger for the renewed gold buying appears to be its rise through its 200-day moving average at $1,848 yesterday," OANDA senior market analyst Jeffrey Halley said in a note.

"However, the pace of the gold rally appears to be outpacing fundamentals right now, and the Relative Strength Index (RSI) has entered overbought territory. That is a warning sign that gold is vulnerable to a short-term pullback."

Elsewhere, silver jumped 1.3% to $28.53, after hitting its highest since Feb. 2 in the session.

Palladium gained 0.3% to $2,910.45 and platinum was steady at $1,239.27.

(Reporting by Brijesh Patel in Bengaluru; Editing by Subhranshu Sahu)